TIDMTPS
RNS Number : 6459Z
Turbo Power Systems Inc
11 March 2013
Press Release
11 March 2013
Turbo Power Systems Inc. ("TPS" or the "Company")
Announces Results for the Year and
Quarter Ended 31 December 2012
Key Features
-- Full year revenue up 9% to GBP15.7 million (2011: GBP14.4 million).
-- Order intake for 2012 was GBP7.1 million (2011: GBP23.0
million) as the Company focused on securing higher margin
contracts.
-- Full year Loss before Interest, Tax, Depreciation,
Amortisation and Stock Compensation increased to GBP6.3 million
(2011: GBP5.1 million) relating to headcount changes and
investments made during the first half of the year.
-- Headcount subsequently reduced from 235 in July 2012 to 176
at 31 December 2012, following a structural review of the
Company.
-- Product focussed R&D held at GBP3.9 million (2011: GBP3.8 million).
-- Operating cash outflow of GBP7.4 million (2011: GBP6.3 million).
-- Net indebtedness reduced to GBP5.2 million (2011: GBP7.5
million) through the May 2012 stock conversion by TAO Sustainable
Power Solutions Ltd ("TAO UK"), and the issue of GBP2.0 million of
new A-Shares.
-- Carlos Neves, the former CFO, was appointed Chief Executive Officer in July 2012.
-- The Company remains critically dependant on TAO UK's loan
funding and continues to explore options for addressing its ongoing
financing requirements.
Commenting, Carlos Neves, Chief Executive Officer, said:
"The year has been one of considerable change. During the second
half we have focused on reducing our cost base, seeking to win
contracts with attractive margins whilst entering into negotiations
on current contracts to improve our terms. We have also leveraged
our investment in operational capability, functional management,
and infrastructure.
I am pleased to report that the markets in which we operate are
either stable or growing, while new opportunities in the rail,
defence and oil & gas sectors are exciting and should provide
the business with opportunities for sustaining revenue growth."
For further information, please contact:
Turbo Power Systems Tel: +44 (0)20 8564 4460
Carlos Neves, Chief Executive Officer
Charles Rendell, Chief Financial Officer
Kreab Gavin Anderson (financial public Tel: +44 (0)20 7074 1800
relations)
Robert Speed
finnCap (NOMAD, broker and financial Tel: +44 (0)20 7220 0500
advisor)
Ed Frisby, Henrik Persson
Notes to Editors
About Turbo Power Systems
Company Website: www.turbopowersystems.com
Turbo Power Systems Inc. (AIM:TPS.L) is a leading UK based
designer and manufacturer of innovative power solutions. TPS's
products are all based on its core technologies of high speed
motors and generators and power electronics and are sold into a
number of market sectors including aerospace, rail, and various
industrial sectors. The Company's products provide high performance
while improving efficiency and reducing process energy consumption
compared to existing technologies.
Turbo Power System's existing customers include blue chip
companies such as Bombardier Transportation, McQuay International
and Eaton Aerospace. The Company also has commercial contracts with
its ultimate parent company, Vale Soluções em Energia S.A. ("VSE"),
the Brazilian energy solutions company, and with Tao Sustainable
Power Solutions (UK) Ltd ("TAO UK"), which is a VSE wholly owned
subsidiary and TPS's parent undertaking, owning 89.4% of the issued
share capital of the Company.
Forward looking statements
This press release contains forward-looking statements.
Forward-looking statements include statements concerning plans,
objectives, goals, strategies, future events, or performance, and
underlying assumptions and other statements that are other than
statement of historical fact. These statements are subject to
uncertainties and risks including, but not limited to, the ability
to meet ongoing capital needs, product and service demand and
acceptance, changes in technology, economic conditions, the impact
of competition, the need to protect proprietary rights to
technology, government regulation, and other risks defined in this
document and in statements filed from time to time with the
applicable securities regulatory authorities.
Definition of non-GAAP financial measures
EBITDA is calculated as the net loss for the period less
financial interest income and charges, foreign exchange gains and
losses, tax charges and receipts, depreciation, amortization and
stock compensation charges. The Company believes that EBITDA is
useful supplemental information as it provides an indication of the
operational results generated by its business activities prior to
taking into account how those activities are financed and taxed and
also prior to taking into consideration asset amortization. EBITDA
is not a recognised measure under GAAP and, accordingly, should not
be construed as an alternative to operating income or net loss
determined in accordance with GAAP as an indicator of financial
performance or of liquidity and cash flows. EBITDA does not take
into account the impact of working capital changes, capital
expenditures and other sources and uses of cash which are disclosed
in the consolidated statement of cash flows. The Company's method
of calculating EBITDA may differ from other issuers and may not be
comparable to similar measures provided by other companies.
Chairman's Statement
2012 has been a year of considerable change for Turbo Power
Systems Inc. ("TPS" or "the Company") as we have prepared for
future growth.
Performance
Revenue in the year to 31 December 2012 ("2012") of GBP15.7
million was up by 9% compared with the previous year.
Order intake in 2012 was GBP7.1 million (2011: GBP23.0 million),
as the Company increased its focus on ensuring that new contracts
won were of a sufficient level of profitability.
2012's operating loss was GBP6.8 million, a year-on-year
increase of 17%, due predominantly to the Company's investment in
headcount (up by 20% to 187 average for 2012) and restructuring of
the senior management team. The investment was undertaken to
address the Company's expectation at the start of the year of
increased customer demand.
In July 2012 the Company reviewed its bid pipeline, its projects
and the skill base of its workforce to ensure that it was
appropriate to meet current and future customer requirements. The
outcome of the review was that during the second half of the year
the Company reduced headcount from 235 in July to 176 in December
(31 December 2011: 206).
Having increased research and development in 2010 and 2011
compared with earlier years, the Board has maintained these costs
at a similar level during 2012 at GBP3.9 million (2011: GBP3.8
million).
General and administrative costs, which consist mainly of staff
costs, facilities costs and the costs associated with the Company's
public listings, were up by 24% to GBP6.1 million (2011: GBP4.9
million), attributable to the higher staff costs, as a result of
higher average headcount and the severance payments following the
organisational restructure.
The loss before taxation for the year was GBP7.2 million (2011:
loss GBP6.2 million).
Capital investment in 2012 amounted to GBP0.35 million (2011:
GBP0.66 million) and related to production equipment, enhanced
technology and software capabilities.
Funding
During the year Tao Sustainable Power Solutions (UK) Limited
("TAO UK"), TPS's majority shareholder, converted GBP8.55 million
of debt financing into share equity in the Company. This increased
TAO UK's ownership of the Company from 75.4% to 89.4%. TAO UK is a
wholly owned subsidiary of Vale Soluções em Energia ("VSE") a
Brazilian company.
The Company also undertook a funding in June 2012 of GBP2.0
million, by way of a private placement of A-Ordinary Shares in its
subsidiary Turbo Power Systems Limited. The A-Ordinary Shares can
be converted into Common Shares of the Company.
TAO UK agreed to increase the Company's existing debt financing
facility to GBP6.09 million (31 December 2011: GBP8.15 million).
This funding has been used to cover working capital needs and
positioning the business to deliver growth in 2013 and beyond.
The Directors regularly review and consider the current and
forecast activities of the Company in order to satisfy themselves
as to the viability of operations. These ongoing reviews include
consideration of current order book and future business
opportunities, current development and production activities,
customer and supplier exposure and forecast cash requirements and
balances. These reviews show that further funding is expected to be
required by the Company before it is forecast to become cash
generative. Based on these budgets and forecasts TAO UK, the
majority shareholder of Turbo Power Systems Inc., continues to
support the Company through the existing loan arrangements and cash
advances as and when required.
The Directors are aware that the Company remains critically
dependent on loan funding but have a reasonable expectation that
the Company has sufficient cash resources based on the expected
parent company support which would be needed to continue in
operational existence while the Company seeks to achieve its target
of being cash flow positive. For these reasons, the Directors
continue to adopt the going concern basis in preparing these
consolidated financial statements, and disclose in Note 2 to the
consolidated financial statements the conditions and events that
cast significant doubt on the Company's ability to continue as a
going concern. As in 2011, the auditor's report contains an
emphasis of matter paragraph referencing this uncertainty relating
to the going concern.
Strategy and Outlook
Looking ahead, the Board intends TPS to remain a technology-led
company.
Carlos Neves was appointed as Chief Executive Officer of the
Company in July 2012. Under Carlos' leadership, the Company has
sought to realign the Company's focus as follows:
-- Improve the quality of the portfolio;
-- Superior execution within design development, manufacturing
operations and support activities; and
-- Consistent delivery of internal improvements.
The Company has been working closely with VSE on securing
contracts in Brazil. So far VSE has secured a key contract with
Petrobras, the major Brazilian Oil & Gas concern, for which the
Company is negotiating a subcontracting agreement. For other
opportunities, we have found that the negotiations have been taking
longer than planned, but we still believe that the Company will be
able to finalise these contracts during the first half of 2013.
Operationally, our focus is on efficiency and synergies. This
will include rationalisation of our operating locations,
particularly at Heathrow where the property lease expires in 2013,
and looking to use our fixed assets in a more productive
manner.
Since 2011 we have recognised that our customer base is
increasingly keen to secure regional manufacturing capability
outside the UK. Therefore during 2012, as part of the focus on
improve the quality of TPS' portfolio, the Company initiated a very
detailed analysis about partnership in markets like Brazil and
India. The review is expected to be concluded and its
recommendations approved by mid-2013.
As noted above, orders were down during 2012, as the Company
focused on ensuring that new contracts were of a sufficient level
of profitability in order to provide a long term future for the
Company. The Company is undertaking an initiative to renegotiate
the contracts with margins aligned with the objectives determined
for each market sector. The initiative is making good progress,
with the prospect of positive settlements in 2013. Other
initiatives include a review of procurement and manufacturing
processes.
The Board and I look forward to 2013's performance with measured
confidence.
Rodrigo Braga
Interim Chairman
11 March 2013
Management's discussion and analysis ("MD&A")
The following information should be read in conjunction with
Turbo Power Systems Inc. ("TPS") audited consolidated financial
statements for the year ended 31 December 2012 and related notes,
which are prepared in accordance with International Financial
Reporting Standards ("IFRS") as issued by the IASB. All amounts in
the MD&A, audited consolidated financial statements and related
notes are expressed in Sterling, unless otherwise noted.
This MD&A contains forward-looking statements.
Forward-looking statements include statements concerning plans,
objectives, goals, strategies, future events, or performance, and
underlying assumptions and other statements that are other than
statement of historical fact. These statements are subject to
uncertainties and risks including, but not limited to, the ability
to meet ongoing capital needs, product and service demand and
acceptance, changes in technology, economic conditions, the impact
of competition, the need to protect proprietary rights to
technology, government regulation, and other risks defined in this
document and in statements filed from time to time with the
applicable securities regulatory authorities. Risk factors are
discussed more fully in the Company's Annual Information Form.
This MD&A has been prepared as at 11 March 2013.
Business of the Company
Turbo Power Systems is a technology-led Company that designs and
manufactures high performance electric motors, generators, and
power electronics systems and provides bespoke solutions to energy
conversion, industrial, transport and military markets.
The track record in engineering innovation, which has been built
and tested over a number of years, allows the Company to meet
challenging design and manufacturing briefs with specific
requirements relating to environmental performance and performance
to volume demands across the world.
TPS has a proven and worldwide track record in the development
and deployment of equipment in the rail and industrial sectors. The
long term relationships with customers in these markets have been
built based on delivering competitive products with proven
reliability.
The know-how developed over the last 30 years, on electrical
machines and power electronics, allows the Company to explore its
current and future portfolio and adjust accordingly to grow in
markets and segments with the targeted profitability.
Way Forward
As a technology-led company that understands the challenges of
the market, mainly regarding quality, costs and timing, it has
sought to realign its objectives focus as follows:
-- Improve the quality of the portfolio;
-- Superior execution within design development, manufacturing
operations and support activities; and
-- Consistent delivery of internal improvements.
Improve the quality of the portfolio
The Company aims to optimise, simplify, standardise and automate
wherever possible the following portfolio categories: products
offered, operational sites, inventory, receivables and
staffing.
The Company recognises that it currently has a concentration of
revenues within just a few customers. The focus has now moved to
enlarge the customer base with a view to diluting the impact of the
current large customers, mainly where our capabilities, products
and bespoken solutions are recognised and the value of our proposal
can be fully appreciated.
Superior execution within design development, manufacturing
operations and support activities
The Company recognises that its 30 years of experience together
with the talented and highly skilled workforce are the most
important assets we have. We firmly believe that these assets under
the new structure put in place in 2012, and our continuous pursuit
of efficiencies, will allow us to react faster and be even more
integrated to fulfil the market's needs.
Consistent delivery of internal improvements
Due to its size and the flat management structure put in place
in 2012, the Company has been able to drive a culture where each of
the areas are more integrated and each is capable of a better
understanding of the overall objectives of the Company and the
roles and responsibilities of each individual. Now, under this
scenario, the Company has been able to start a series of
initiatives that will address long term revenue growth and cost
reductions.
All the above objectives will continue the culture of cost
consciousness and drive excess costs out of the business.
Current Operating Climate
Both the transport market and industrial sectors have been
stable and started to show signs of growth in 2012. This has made
it possible for TPS to deliver improved manufacturing output during
2012. Further growth is anticipated during 2013, supported by the
existing order book and the visibility of future orders being
bid.
As stated last year, governments are continuing to invest in
infrastructure projects and, indeed, view transport initiatives
such as new rail programmes as a way of helping to sustain their
industries whilst providing necessary public transportation and
having a positive impact on the environment.
In the defence arena, the Company has continued to identify
specialist pockets of growth potential in areas where TPS'
technology can be applied. We have initiated contact with potential
future partners and will continue to investigate this market
further and hope to see increased activity during the coming
years.
Marine and Oil & Gas sectors development has seen the number
of opportunities to utilise TPS products and technologies in 'new'
markets increase markedly. A significant amount of market analysis
and concept work started in 2011 and this will continue in 2013.
The market potential is significant and the links with VSE, our
ultimate parent, have provided the business with important
leverages in Brazil. This has resulted in VSE contracting with a
major Brazilian Oil & Gas company, for which we are negotiating
a subcontracting agreement.
The requirements for high system efficiencies and sustainability
are becoming important factors by which products and services are
selected. TPS's technologies and know-how have allowed it to offer
competitive solutions in the road to sustainability. These
technologies are applicable to the renewable energy sector and to
waste energy recovery applications. The technology is intended to
enhance system efficiencies and thus contribute to the
sustainability goals. The market potential for TPS technologies in
this sector is significant and further development in these markets
is anticipated.
The Company now reports its segmental operations in the
Financial Statements Note 8 between Engineering (i.e. product
creation) and Production (i.e. product sales). This is due to the
significantly different nature of the activities and the different
control processes in place. The Company operates in various markets
and produces various products for those markets. All products that
the Company manufactures and sells have been through the Company's
product creation process and are unique to the Company.
Current Programmes
-- Transport
o Rail
The programme to develop the auxiliary power solution for
Bombardier Systems' new Innovia ART Vehicle platform continues to
make progress, while the business is also engaged in the overhaul
and support of the CL165 vehicle auxiliary power solution for
Chiltern Railways. The rate of delivery continues to grow on the
major programmes (Bombardier Chicago Transit Authority and
Bombardier Toronto). During 2012 the Sao Paulo monorail project has
completed its qualification program and started production phase.
To date we have delivered 27 units.
Deliveries on our overhaul and refurbishment programmes continue
to be made to customers' call off requirements.
We continue to pursue new customers in the Rail market with the
intention of providing platform solutions that are applicable for
more than one project at a time.
o Aerospace
The Jettison Fuel Pump motor drives for Eaton Aerospace continue
to be delivered in line with the customer's call-off rate. Now the
Boeing 787 Dreamliner has entered into revenue service, orders
quantities have increased in line with the aircraft build
acceleration. While currently the 787 Dreamliner is being reviewed,
our production schedule remains on track.
-- Industrial
o Laser Power Supplies
The demand from our customer continued during 2012 and provided
steady production through the year. The expectation for 2013 is
that demand will continue at a similar rate.
o Industrial Motors and Drives
The delivery of systems to our industrial motors and drives OEM
(McQuay International) continues for the orders placed in early
2012. The customer's expectation is that the demand will keep
increasing across the coming years. These units are for use in
McQuay International's Magnitude WME Chiller.
Further development work is on-going to ensure the business
remains competitive in this market.
The Becker laser blower products have seen a continuing demand
throughout the year. A new Long Term Supply Agreement is in place
for production deliveries in 2013 and 2014.
-- Defence
o 1MW High-Speed Generator
Having completed system trials of our high-speed machine in
2011, we delivered a new unit that was integrated into the
customers' system in late 2012. We are anticipating demand for
additional units and we are awaiting confirmation from the
customer.
-- Marine/Oil & Gas
o Development
During the year the business has seen a marked increase in the
number of opportunities to utilise its products and technologies in
new markets. Market analysis and concept work which started in 2011
will continue in 2013. The market potential is significant and the
links with VSE have provided the business with important access to
the Brazilian market.
Listing
In July 2012 the Company delisted from the Toronto Stock
Exchange ("TSX"). The Company still maintains a listing on the
London Stock Exchange AIM.
At the Annual General Meeting in May 2012 various matters were
agreed by the shareholders, including the proposed share
consolidation. In light of the delisting from the TSX, the
Directors considered that it was in the best interests of the
Company not to continue with the share consolidation.
Auditors
In November 2012, the Company changed its independent auditors
to PricewaterhouseCoopers LLP. This move was to align the Company
with its major shareholder, TAO UK, and its ultimate parent, VSE.
The Board considers that this change should bring both financial
and operational efficiencies to the Company.
Summary
In summary, 2012 was a year of continued growth. The business is
leveraging its investment in operational capability, functional
management and infrastructure. The markets in which the business
operates are either stable or growing. New opportunities in the
Marine and Oil & Gas sectors are exciting and should provide
the business with additional opportunities for sustained
growth.
The Company remains critically dependent on loan fundingin 2013
to continue funding the growth in 2013 and beyond.
The current order book extends over the next two years. The need
to win further substantial orders, execution of those orders and
completion of development programmes in a consistent and timely
manner are key to delivering management's plans for the improved
results during 2013 and beyond.
Financial Performance
Total revenues in the year of GBP15.66 million were 9% higher
than in the previous year, (2011: GBP14.40 million), primarily due
to increased production volumes.
Research and product development costs increased by 3% to
GBP3.90 million (2011: GBP3.78 million), as the Company's
investment stabilises.
General and administrative costs, which consist mainly of staff
costs, facilities costs and the costs associated with the Company's
public listings, were up by GBP1.2 million (25%) to GBP6.1 million
(2011: GBP4.9 million). The major element in the increase was
higher staff costs, as a result of increased headcount during the
first half of the year, the subsequent severance payments following
the organisational restructure and the loan conversion costs.
During the second half of the year the Company reduced headcount
from 235 in July to 176 in December.
The Company recorded a loss before interest, tax, depreciation,
amortization, and stock compensation of GBP6.27 million (2011:
GBP5.10 million), primarily as a result of increased general and
administration expenditure, which as noted above rose by GBP1.2
million.
The Company recorded an operating cash outflow before working
capital movements of GBP6.08 million for the year (2011: GBP5.40
million). After adjusting for changes in working capital items and
purchases of property, plant and equipment, the Company suffered an
overall cash outflow before financing of GBP7.72 million (2011:
GBP6.40 million).
Net cash inflow from financing during 2012 of GBP7.92 million
(2011: GBP6.25 million), resulted in an overall net cash inflow for
the year of GBP0.20 million (2011: outflow GBP0.15 million).
The Company finished the year with an unrestricted cash balance
of GBP0.86 million (2011: GBP0.65 million) and held further cash of
GBP0.03 million (2011: GBP0.34 million) associated with rent and
utility deposits.
During the year ended 31 December 2012 the Company undertook
significant transactions with related parties.
The Company has a loan facility from its majority investor TAO
UK, to support working capital requirements, bearing interest at 6%
and being repayable upon request after 1 January 2012. At the
beginning of 2012 the loan balance outstanding was GBP8.17 million.
During the year the Company increased the loan by GBP5.92 million
and in May 2012 TAO UK converted GBP8.55 million (including rolled
up interest) into equity in the Company and extended the repayment
date to the 1 April 2014. As at the 31 December 2012 the amount
outstanding is GBP6.09 million including rolled up interest. The
Company raised invoices for GBP1.01 million (2011: GBP0.89 million)
to VSE, the parent organization of TAO UK, for initial development
activities under arms-length commercial contracts.
Going Concern
These consolidated financial statements have been prepared on
the basis of International Financial Reporting Standards (IFRS)
applicable to a "going concern", which assume that the Company will
continue in operation for the foreseeable future and will be able
to realize its assets and discharge its liabilities in the normal
course of operations.
The Company is dependent upon the continued financial support of
its intermediate parent undertaking TAO UK, who in turn is
dependent on their parent undertaking Vale Soluções em Energia S.A
(VSE), for such continued financial support in order to meet
forecasted working capital requirements and support the Company's
growth plans. If not secured, this may result in the curtailment of
the Company's activities.
As at 31 December 2012 the Company had net operating outflows,
with a net debt of GBP8.91 million, being GBP9.8 million of debt
less GBP0.89 million of cash. The Company has a cumulative deficit
of GBP93.42 million as at 31 December 2012 and continued to be loss
making for the year then ended.
If the Company is unable to generate positive cash flows from
operations or secure additional debt or equity financing these
conditions and events would cast substantial doubt regarding the
going concern assumption and, accordingly, the use of accounting
principles applicable to a going concern.
These consolidated financial statements do not reflect
adjustments to the carrying values of the assets and liabilities,
the reported expenses and the balance sheet classifications, which
could be material, which would be necessary if the going concern
assumption were not appropriate.
However the Directors believe that they will succeed in
delivering the Company's projected financial performance and that
support from TAO UK and, ultimately, VSE will remain in place to
enable the Company to achieve its growth plans. Accordingly they
have continued to adopt the going concern basis of preparation.
Summary of Quarterly Results
The following table sets out selected quarterly consolidated
financial information of the Company for the last eight
quarters:
Revenue Research General and Net profit/ Profit/
All amounts in GBP'000 and product administrative (loss) (loss)
development per
share
March 2011 2,083 950 1,166 (1,617) (0.1)
June 2011 3,278 836 1,076 (1,439) (0.1)
September 2011 4,604 975 1,221 (941) (0.1)
December 2011 4,438 1,016 1,438 (2,176) (0.1)
-------- ------------- --------------- --------------- --------
14,403 3,777 4,901 (6,173) (0.4)
March 2012 4,525 953 1,336 (2,061) (0.1)
June 2012 4,039 1,219 1,516 (1,475) (0.1)
September 2012 3,555 974 1,736 (1,669) (0.1)
December 2012 3,545 758 1,530 (1,959) (0.1)
-------- ------------- --------------- --------------- --------
15,664 3,904 6,118 (7,164) (0.3)
Research and development expenditure in 2012 was 3% higher than
2011. The decrease in December 2012 relates to the cyclicality of
development projects.
Reflecting the benefit of the organisational restructure
undertaken during the second half of 2012, general and
administrative overheads have reduced in the last quarter.
Definition of non-GAAP financial measures
EBITDA is calculated as the net loss for the period less
financial interest income and charges, foreign exchange gains and
losses, tax charges and receipts, depreciation, amortization, and
stock compensation charges. The Company believes that EBITDA is
useful supplemental information as it provides an indication of the
operational results generated by its business activities prior to
taking into account how those activities are financed and taxed and
also prior to taking into consideration asset amortization. EBITDA
is not a recognised measure under GAAP and, accordingly, should not
be construed as an alternative to operating income or net loss
determined in accordance with GAAP as an indicator of financial
performance or of liquidity and cash flows. EBITDA does not take
into account the impact of working capital changes, capital
expenditures and other sources and uses of cash which are disclosed
in the consolidated statement of cash flows. The Company's method
of calculating EBITDA may differ from other issuers and may not be
comparable to similar measures provided by other companies.
Reconciliation of net loss to EBITDA result
Quarter ended Year ended
31 December 31 December
2012 2011 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000
Net loss (1,959) (2,176) (7,164) (6,173)
Add back:
Finance income (6) 1 (6) (2)
Finance expense 213 142 359 337
Foreign exchange (gain)/loss (163) 48 157 65
Depreciation 248 110 297 581
Amortisation (18) 14 48 14
Stock Compensation 15 31 37 75
---------- ---------- ---------- ----------
EBITDA loss (1,670) (1,830) (6,272) (5,103)
---------- ---------- ---------- ----------
Copies of Quarterly and Annual Results
The Company's full Financial Results and Managements' Discussion
and Analysis are available on www.sedar.com and full financial
statements will be mailed to shareholders during April 2013.
Copies of the quarterly and annual results are available from
the Company's office at Unit 3 Summit Centre, Hatch Lane, West
Drayton, Middlesex, UB7 0LJ, United Kingdom or available to view
from the Company's website at www.turbopowersystems.com.
Turbo Power Systems Inc.
Consolidated statement of comprehensive loss
________________________________________________________________________________
Notes Quarter Ended Year Ended
31 December 31 December
2012 2011 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 4,5 3,545 4,438 15,664 14,403
Cost of sales (2,879) (3,872) (11,724) (10,944)
-------- -------- --------- ---------
Gross profit 666 566 3,940 3,459
Expenses
Distribution costs (131) (147) (729) (619)
Research and product
development (758) (1,016) (3,904) (3,777)
General and administrative (1,529) (1,438) (6,118) (4,901)
-------- -------- --------- ---------
Total expenses (2,418) (2,601) (10,751) (9,297)
Operating loss (1,752) (2,035) (6,811) (5,838)
Finance income 6 1 6 2
Finance expense (213) (142) (359) (337)
Loss before tax (1,959) (2,176) (7,164) (6,173)
Income tax expense - - - -
Net loss and total comprehensive
loss for the periods (1,959) (2,176) (7,164) (6,173)
Loss per share - basic
and diluted 6 0.1p 0.1p 0.3p 0.4p
======== ======== ========= =========
The Notes are an integral part of these Consolidated Financial
Statements
Turbo Power Systems Inc.
Consolidated statement of financial position
________________________________________________________________________________
Notes As at As at
31 December 31 December
2012 2011
GBP'000 GBP'000
Current assets
Restricted cash 28 23
Inventories 2,695 3,201
Trade and other receivables 3,540 3,203
Prepayments 298 326
857 653
Cash and cash equivalents -------- --------
7,418 7,406
-------- --------
Non-current assets
Intangible assets 63 350
Property, plant and equipment 770 777
- 320
Restricted cash -------- --------
833 1,447
-------- --------
Total assets 8,251 8,853
==== ====
Current liabilities
Trade and other payables 3,730 5,453
Loans and borrowings - 8,166
221 540
Provisions -------- --------
3,951 14,159
-------- --------
Non-current liabilities
Loans and borrowings 6,085 -
1,122 1,020
Provisions -------- --------
7,207 1,020
-------- --------
Total liabilities 11,158 15,189
Equity (deficit)
Share capital 7 71,408 62,862
Convertible shares 7 17,310 15,310
Other reserves 7 1,793 1,756
(93,418) (86,254)
Retained deficit ---------- ----------
Deficit (2,907) (6,326)
Total liabilities and equity 8,251 8,853
===== =====
Approved by the Board:
R B Braga, Interim Chairman
11 March 2013
The Notes are an integral part of these Consolidated Financial
Statements
Turbo Power Systems Inc.
Consolidated statement of changes in equity
________________________________________________________________________________
Share Convertible Other Retained Total
capital shares reserves deficit
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 31 December
2010 62,862 15,310 1,681 (80,081) (228)
Net loss for the year - - - (6,173) (6,173)
Stock compensation - - 75 - 75
--------- --------- --------- --------- ---------
Balance at 31 December
2011 62,862 15,310 1,756 (86,254) (6,326)
Net loss for the year - - - (7,164) (7,164)
Stock compensation - - 37 - 37
Issue of shares 8,546 2,000 - - 10,546
--------- --------- --------- --------- ---------
Balance at 31 December 71,408 17,310 1,793 (93,418) (2,907)
2012 ===== ===== ===== ====== =====
The Notes are an integral part of these Consolidated Financial
Statements.
Turbo Power Systems Inc.
Consolidated statement of cash flows
________________________________________________________________________________
Year ended 31
December
Notes 2012 2011
GBP'000 GBP'000
Cash flows from operating
activities
Loss for the year (7,164) (6,173)
Adjustments for
Finance income (6) (2)
Finance expense 359 337
Tax credit in operating expenses - (230)
Depreciation of property,
plant and equipment 295 581
Amortisation of intangible
assets 49 14
Asset retirement obligation 48 -
Disposal of Intangible Asset 300 -
Share based payment expenses 37 75
--------- ---------
Operating cash flows before movements
in working capital (6,082) (5,398)
Changes in working capital
items
Decrease/(increase) in inventories 506 (1,545)
Decrease in restricted cash 315 429
Increase in trade and other receivables (337) (1,952)
Decrease in prepayments 28 42
(Decrease)/Increase in provisions (217) 267
(Decrease)/Increase in trade and
other payables (1,585) 1,835
--------- ---------
Cash used in operating activities (7,372) (6,322)
--------- ---------
Interest received 6 2
Taxes received - 580
--------- ---------
Net cash used in operating activities (7,366) (5,740)
Cash flows from investing
activities
Purchase of property, plant and
equipment (272) (292)
Purchase of intangible assets (78) (364)
--------- ---------
Net cash used in investing (350) (656)
activities --------- ---------
Cash flows from financing
activities
Proceeds from issue of share
capital 7 10,546 -
Repayment of loans 8 (8,546) -
Proceeds from increase in
loans 8 5,920 6,250
--------- ---------
7,920 6,250
Net cash from investing activities --------- ---------
Net increase/(decrease) in
cash and cash equivalents 204 (146)
Cash and cash equivalents 653 799
at the beginning of the year ---------- ----------
Cash and cash equivalents 857 653
at the end of the year ====== ======
The Notes are an integral part of these Consolidated Financial
Statements
Turbo Power Systems Inc.
Notes to the consolidated financial statements
________________________________________________________________________________
1 Reporting entity
Turbo Power Systems Inc. ("The Company") is subsisting pursuant
to the Business Corporations Act (Yukon Territory). The Company's
registered office is Suite 200-204 Lambert Street, Whitehorse,
Yukon Y1A 3T2, Canada.
The Company conducts operations through its wholly owned
subsidiary company, Turbo Power Systems Limited ("TPSL") and the
main trading address is Unit 3, Heathrow Summit Centre, Skyport
Drive, Hatch Lane, West Drayton, Middlesex UB7 0LJ, United
Kingdom.
The Company's intermediate parent undertaking is TAO Sustainable
Power Solutions (UK) Limited ("TAO UK"), a company registered in
England and Wales, UK. The Company's ultimate parent undertaking is
Vale Soluções em Energia S.A. ("VSE"), a company registered in
Brazil.
The Company's subsidiaries comprise:
Trading Place of % Ownership
status incorporation
Turbo Power Systems Limited Trading England 100%
Turbo Power Systems Development
Limited Dormant England 100%
Intelligent Power Systems Limited Dormant England 100%
Nada-Tech Limited Dormant England 100%
TPSL has initiated commercialisation of its technology in
relation to high speed permanent-magnet machine systems for power
generation and industrial motor applications at its London
location, whilst its operation based in North East England is an
established provider of advanced power electronics.
2 Going concern
These consolidated financial statements have been prepared on
the basis of International Financial Reporting Standards (IFRS)
applicable to a "going concern", which assume that the Company will
continue in operation for the foreseeable future and will be able
to realize its assets and discharge its liabilities in the normal
course of operations.
The Company is dependent upon the continued financial support of
its intermediate parent undertaking TAO UK, who in turn is
dependent on their parent undertaking Vale Soluções em Energia S.A
(VSE), for such continued financial support in order to meet
forecasted working capital requirements and support the Company's
growth plans. If not secured, this may result in the curtailment of
the Company's activities.
As at 31 December 2012 the Company had net operating outflows,
with a net debt of GBP8.91 million, being GBP9.8 million of debt
less GBP0.89 million of cash. The Company has a cumulative deficit
of GBP93.42 million as at 31 December 2012 and continued to be loss
making for the year then ended.
If the Company is unable to generate positive cash flows from
operations or secure additional debt or equity financing these
conditions and events would cast substantial doubt regarding the
going concern assumption and, accordingly, the use of accounting
principles applicable to a going concern.
These consolidated financial statements do not reflect
adjustments to the carrying values of the assets and liabilities,
the reported expenses and the balance sheet classifications, which
could be material, which would be necessary if the going concern
assumption were not appropriate.
However the Directors believe that they will succeed in
delivering the Company's projected financial performance and that
support from TAO UK and, ultimately, VSE will remain in place to
enable the Company to achieve its growth plans. Accordingly they
have continued to adopt the going concern basis of preparation.
3 Basis of preparation
These financial statements comply with and have been prepared in
accordance with the recognition and measurement principles of IFRS
in issue and effective at 31 December 2012.
The consolidated financial statements were authorised for
issuance by the Board of Directors on 11 March, 2013.
The consolidated financial statements have been prepared under
the historical cost convention.
The consolidated financial statements are presented in GBP
sterling, rounded to the nearest GBP1,000, which is the Company's
functional and presentation currency.
4 Geographic Information
Total Revenues by destination 2012 2011
GBP'000 GBP'000
UK 2,248 3,518
USA 4,240 5,463
Canada 6,991 4,254
Rest of world 2,185 1,168
15,664 14,403
============== ==============
All property, plant and equipment was located within the United
Kingdom during both periods ended 31 December 2012 and 31 December
2011.
5 Segmental analysis
The Company has historically operated from two facilities in the
UK and run each location as a separate unit. During 2011 the
Company underwent management and operational changes to bring the
reporting segments in line with the strategy of designing and
manufacturing integrated systems. Accordingly the Company's two
reportable segments have changed from the power electronics
segment, which is involved in the development and manufacture of
electrical power supply and control systems and the electrical
machines segment, which is involved in the development and
commercialisation of high speed electrical machines.
The Company now operates a more integrated operation structured
along the lines of product research and development, and
production. The Board and management make strategic decisions and
review the results of the Company on this basis. Corporate charges
relating to the financing of the Company and other related
management activities are allocated between the two reportable
segments.
The Board together with the Chief Executive Officer and the
Chief Financial Officer are the chief operating decision makers for
the Company.
The segmental report for 2012 has been presented on that basis,
with the comparatives for 2011 presented on the same basis.
Both segments operate in the United Kingdom. Except for the
investments held by the Company which are located in Canada, all of
the Company's assets are located in the United Kingdom.
31 December 2012 Production Development Unallocated Total
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 12,678 2,986 - 15,664
=========== ============ ============ =========
Segment operating
loss (2,469) (4,342) - (6,811)
Finance expense - - (353) (353)
Net loss and total
comprehensive loss (2,469) (4,342) (353) (7,164)
=========== ============ ============ =========
Total assets 5,481 1,766 1,004 8,251
Total liabilities (2,623) (1,328) (7,207) (11,158)
31 December 2011 - Production Development Unallocated Total
Restated Restated
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 12,064 2,339 - 14,403
=========== ============ ============ ==========
Segment operating
loss (1,641) (4,197) - (5,838)
Finance expense - - (335) (335)
Net loss and total
comprehensive loss (1,641) (4,197) (335) (6,173)
=========== ============ ============ ==========
Total assets 5,662 2,195 996 8,853
Total liabilities (4,742) (1,510) (8,937) (15,189)
December 2011 figures have been restated to follow the more
integrated operational structure, this restatement has no impact on
the prior year's profit and loss, assets or liabilities.
6 Loss per share
Loss per share has been calculated using the weighted average
number of shares in issue during the relevant financial
periods.
2012 2011
Loss attributable to ordinary shareholders GBP7,164,000 GBP6,173,000
Weighted average number of shares
outstanding 2,584,485,837 1,437,754,811
As the Company experienced a loss in both years all potential
common shares outstanding from dilutive securities are considered
anti-dilutive and are excluded from the calculation of diluted loss
per share.
Weighted average number of common shares:
2012 2011
Issued common shares at 1 January 1,437,754,811 1,437,754,811
Effect of common shares issued in 1,146,731,026 -
May 2012
____________ ____________
2,584,485,837 1,437,754,811
Weighted average number of common ____________ ____________
shares at 31 December
Details of anti-dilutive potential securities outstanding not
included in loss per share calculations at December 31 are as
follows:
2012 2011
Common shares potentially issuable:
- under stock options (Note 26) 31,007,273 31,377,273
- pursuant to A Ordinary stock conversion
(Note 26) 892,777,778 448,333,334
____________ ____________
923,785,051 479,710,607
____________ ____________
7 Share capital and other reserves
Share Capital
Common Shares Convertible Shares
(A Ordinary Shares)
Number GBP'000 Number GBP'000
At 1 January 2011 1,437,754,811 62,862 448,333,334 15,310
Shares issued - - - -
-------------------- -------------- ------------------ --------------
At 31 December
2011 1,437,754,811 62,862 448,333,334 15,310
Shares issued 1,899,111,111 8,546 444,444,444 2,000
-------------------- -------------- ------------------ --------------
At 31 December
2012 3,336,865,922 71,408 892,777,778 17,310
==================== ============== ================== ==============
The Company is authorised to issue an unlimited number of common
shares and an unlimited number of preferred shares, issuable in
series, without nominal or par value. All common shares rank
equally with regard to the Company's residual assets.
The holders of common shares are entitled to receive dividends
as declared from time to time, and are entitled to one vote per
share at meetings of the Company.
Holders of A Ordinary Shares of Turbo Power Systems Limited
("TPSL") (Convertible shares), carry no voting rights, cannot
attend any shareholder meetings and, in the event of winding-up of
TPSL are entitled to a maximum distribution of GBP500,000 in
aggregate, to rank before the Common Shares. The A Ordinary shares
are convertible into an equal number of Common Shares of the
Company on request by the holder, having given 61 days notice.
Under certain take over or change in control events, the A Ordinary
Shares are exchangeable under "super exchange" rights, converting
for 3 Common shares of the Company for every A Ordinary Share
held.
As the A Ordinary Shares are non-participating interests in TPSL
and are non-voting, no current year or cumulative net losses have
been allocated to the A Ordinary Shares.
Issue of common shares:
On 25 May 2012 the Company issued 1,899,111,111 common shares to
TAO UK as a result of the financing and conversion of debt in the
Company, at a price of 0.45p per share.
On 31 May 2012, TPSL, as part of the financing, issued
444,444,444 A-Ordinary shares at 0.45p in a private placement to
various existing A-Ordinary shareholders.
Other reserves
At 31 December 2012, other reserves comprise of the stock
compensation reserve of GBP1,793,000 (2011: GBP1,756,000).
Potential issue of common shares
The Company has issued share options under the 2002 Stock Option
Plan and A Ordinary Shares that are convertible into common shares
of the Company.
31 Dec 31 Dec
2012 2011
Under stock option plan 31,007,273 31,377,273
Pursuant to A Ordinary stock conversion
(Note 28) 892,777,778 448,333,334
------------------
923,785,051 479,710,607
------------------ ------------------
8 Related party transactions
Transactions with the parent and ultimate parent company
On 16 June 2010 the Company completed a fundraising and
investment transaction that resulted in TAO UK, the wholly owned UK
subsidiary of the Brazilian energy solutions company VSE, investing
GBP6.5 million in exchange for 1,083,333,334 Common Shares in the
Company, giving TAO UK a 75.4% controlling stake in the Company on
an undiluted basis. The transaction was recorded at exchange
amount. On 25 May 2012 the Company issued 1,899,111,111 common
shares to TAO UK as a result of the conversion of GBP8.54 million
of debt in the Company, at a price of 0.45p per share, increasing
the controlling share to 89.4%
On 22 October 2010 the Company agreed a loan facility with TAO
UK (as subsequently amended), which bears interest at 6% per annum
and is repayable upon demand commencing 2 January 2012. The loan is
secured by a fixed and floating charge over the assets of the
Company's subsidiary Turbo Power Systems Limited. During 2012 the
loan repayment date was extended to 1 April 2014.
A summary of the loan movement is:
GBP'000
Balance as at 1 January
2012 8,166
Date of drawdown
30 January 2012 1,020
26 March 2012 1,800
10 October 2012 1,500
5 December 2012 1,600
Prior years accrued
interest 379
Loan conversion to equity (8,545)
Accrued interest 2012 165
Balance at 31 December
2012 6,085
--------------
Accrued interest is recorded within the loan balance GBP165,000
(2011: GBP353,000)
During 2012 the Company has transacted business with both TAO
UK, totalling GBPnil (2011: GBP82,000), and with VSE, totalling
GBP1,013,000 (2011: GBP888,000). Amounts outstanding as at 31
December 2012 are TAO UK owed GBPnil (2010: GBP63,000); VSE owed
GBPnil (GBPnil) to the Company.
All transactions were conducted within the normal course of
business for supply of engineering design services and were
transacted at arms-length.
Key Management personnel compensation
In addition to their salaries, the Company provides non-cash
benefits to executive management and contributes to a defined
contribution pension plan. Some executive officers participate in
the share option programme.
Key management personnel compensation comprises the
following:
2012 2011
GBP'000 GBP'000
Salaries 844 664
Bonus and termination payments 164 612
Pension contributions 78 40
Stock compensation expense 37 68
1,123 1,384
============== ==============
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SSAFAAFDSELD
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